“Interestingly, there is one special case where no-fee interconnection is embraced by the big ISPs — when they are connecting among themselves. They argue this is because roughly the same amount of data comes and goes between their networks. But when we ask them if we too would qualify for no-fee interconnect if we changed our service to upload as much data as we download (in other words, moving to peer-to-peer content delivery) — thus filling their upstream networks and nearly doubling our total traffic — there is an uncomfortable silence.”

This brings up an interesting question: Could Netflix actually do that?

Could a service like Netflix stream videos via P2P?

P2P is best known for file sharing — think Napster’s MP3 swapping and movie downloads from the Pirate Bay, or even licensed torrent downloads, courtesy of BitTorrent Inc. At its core, it just means that users don’t access data from a central server, but instead exchange it between one another — and that same technology can easily be used for video streaming as well.

In fact, Chinese video services used P2P as their primary distribution mechanism for video streams for years. The Chinese internet was traditionally fragmented, with infrastructure being centered around a few major state-owned telecommunications companies. Reaching consumers with adequate speeds to stream video would have required significant investment from video service providers, which is why many of them decided to distribute P2P streaming clients instead.

Services like PPStream, PPLive and Xunlei all used their own P2P software, and even major broadcasters like CCTV used P2P to reach millions of viewers during major sporting events with higher reliability and lower costs than a server-based architecture could have afforded them. Only in recent years has there been a trend toward central architectures for some of these offerings.

In the U.S., P2P was also used for some time to power video streaming for CNN and others, but falling bandwidth costs and the unwillingness of consumers to install plugins or clients for streaming led most services to switch to a central architecture. Most recently, BitTorrent shut down its efforts to bring P2P live streaming to desktop PCs, and decided to focus on mobile devices instead.

Would P2P really double Netflix’s traffic?

Hastings suggested Thursday that P2P would “nearly double” Netflix’s traffic. That assessment was obviously meant to put pressure on ISPs, and a closer look shows that the math isn’t all that clear.

When a Netflix subscriber watches an episode of House of Cards in HD, he consumes about 3GB of data. If that same subscriber were also to upload that very same data to someone else to distribute it in a P2P fashion, it would lead to a total consumption of 6GB. Right?

Well, not so fast. First of all, by getting the data from the first user, the second subscriber wouldn’t access House of Cards from Netflix’s servers, which would mean that in total, about the same amount of data would change hands. And in reality, there wouldn’t just be two people watching the same content, but likely thousands, ideally leading to only incremental data consumption increases for each consumer. With a slightly larger overhead, there would be some traffic increase, but it’s very unlikely that this number would approach 100 percent.

Peering and the last mile: So close, yet so far

The real question here isn’t whether the total amount of bits caused by Netflix viewing would increase, but what the impact on peering as well as the last mile would be. Hastings suggested that switching to P2P could essentially lead to a world in which Netflix viewers would send as much traffic from an ISP’s network to other networks as they would consume. The real impact on peering would largely depend on the P2P architecture used.

Back when BitTorrent and other file-sharing technologies had a larger impact on ISP networks, some P2P developers banded together to propose a technical solution for this very problem. Dubbed P4P, it gave ISPs a way to steer the flow of file sharing traffic to make sure that users connected to geographically closer peers, or peers on networks that allowed them settlement-free peering. So if Netflix and ISPs cooperated, they could make P2P work — but given the current situation, that’s a big if.

The other pain point is the last mile. Back in 2008, Comcast admitted to throttling BitTorrent. It argued that file sharers were consuming too much bandwidth on the local level, causing network congestion for their neighbors. Comcast eventually moved away from these measures and towards data caps, and BitTorrent changed the protocol of its clients to be more aware of the state of the network and yield to other traffic. But if Netflix flipped the switch on P2P tomorrow, it could put lots of stress on the last mile, which could be the real choke points for ISPs.

What about mobile and TVs?

One of the challenges for Netflix would be that more than 80 percent of its traffic comes from mobile and connected devices. Distributing a P2P plugin to PCs is relatively simple, but making it work on the Xbox One (S MSFT) could be significantly more challenging. P2P has been done on mobile devices, and adding a P2P component to Netflix’s mobile apps should be possible, even though issues like data caps on mobile plans as well as battery life would have to be addressed.

But the real issue could be making this work in the living room, where Wi-Fi could become another choke point. Consumers frequently use older networking equipment they got from their ISPs, and getting adequate bandwidth for HD video streaming is already a challenge for many. Now imagine that their smart TVs were also uploading bits and pieces as they streamed Orange is the New Black, and you can see that they’d frequently end up with congestion in the home. Some consumers might go out and finally buy a new router, but many would just blame Netflix if their streaming looked worse.

In the end, Netflix switching to P2P is nothing more than an academic exercise. Yes, it would be possible, and yes, it would save the company some money. But with the large number of Netflix users and the wide variety of devices they use to watch Netflix, P2P would also bring up a whole range of new problems.

This doesn’t stop to take into consider those of us who have bandwidth caps. I don’t use Netflix – just with my normal internet usage between my eight year old and I, we use about 150 gigs a month of a 250 gig cap. I don’t use a streaming service for exactly this reason – I don’t want to run over my cap and end up paying overages. As long as the P2P aspect were an optional thing, and easy for users to shut off, then it might be okay. I’d love to cut the cord and go to watching all my shows (which are broadcast only for the most part) with an OTA antenna and then use a streaming service like Netflix, but the cost of bandwidth makes that situation basically equal to what I’m paying now. Maybe if someone can get US ISPs to back off the idea of caps, then something like this would be feasible. I would gladly share my spare bandwidth for such a thing, as long as I didn’t have to worry about paying more for it at the ISP level.

Think about it on a $/MB basis. If you don’t hit your data cap every month your $/MB goes up the farther you are from your cap. Only when you reach your cap and even go over do you truly get the maximum value from your ISP’s data plan.

If you are using 150g of a 250g plan, you are paying for 100g that you don’t use. Good for your IPS, bad value for you.

P2P streaming has never taken off and never will because users don’t want content owners using their Inet Connection to deliver content to other users. It lowers the QoS of the connection and literally robs them of paid bandwidth. Fail.

1) Rights. The digital era has created new legal terms describing the distribution of media. Some are subsets of each other, while others stand on their own. IPTV, OTT, Streaming, VOD, SVOD, AVOD, EST, Rental, etc… are all bought and sold during the rights acquisition process. If you have purchased the SVOD Streaming rights for OTT, you may not own the SVOD P2P Streaming rights for mobile and would have to purchase them separately.

In the past, rights holders saw digital as just “digital” and sold each segment as one big omnibus package. Today, they are slicing up the pie in as many pieces to get maximum value out of their offerings.

This is going to cost Netflix more for licensing.

2) Technology. Your computer/mobile/smart phone may be able to handle a P2P service but your “Smart TV” is pretty far from it. Apps for most Smart TVs are limited by a wide variety of technical roadblocks: CPU speed, Limited Development Environment, Limited Storage. Asking it to run a P2P app in the background is going to be difficult at best.

Retooling all of their apps will cost Netflix more for development.

3) Bandwidth cost. For people with capped data plans, serving up an unknown number of bits through a P2P topology creates a perception of added cost. $7.99 for Netflix + $?.??/month for Netflix P2P might be too much. Customer might also think, “Why am I subsidizing Netflix with my bandwidth?” This could be a really tough sell to the customer and an easy target for competitors.

Don’t license holders require Netflix to prevent local storing of “their” content on the users’ machines? IIRC, this is why most VOD services use the DRM-optimized Silverlight plugin and Netflix would break their contracts were they to enable P2P.

Most ISP’s throttle P2P traffic anyway, regardless of content. Why? Because they oversell their bandwidth to absurd ratios.
Moving from CDN to P2P, does not help them, because the same amount of data will need moving, but less centralized.
Also … data caps. No ISP in my country dares to even mention them, but others aren’t so lucky. What about them? They would get a lot of extra traffic for no benefit at all.

Not all P2P are abusive on the last mile. I installed Giraffic’s and the upload is using less than 50kbps of the uplink. They simply aggregate more idle users per stream and since at the end of the day 90â„… of users’ uplink IS idle there is marginal impact on the uplink.

The amount of caching required would be ridculous. The simplified version presented here falls on its side if the first (or any non-end link in the P2P chain) does something simple like Pause, or skip forward to the 50% mark. And what if the first presses Stop and selects something else to watch. The remaining 50 people would have to elect a master node, that node would have to connect to Netflix and resume the stream, including all of the watched material for other nodes that are behind them and possibly multiple points ahead in case other nodes move ahead of them. It’s messy. Presumably these Chinese variants take all this into consideration.

I can see it now. If your network is robust enough and you agree to act as a node to distribute content in addition to consuming it, your monthly rate drops to $4.99 and if your network can’t hack it, then your price goes to $9.99

ISPs cry foul, again. They want to be able to charge X dollars for a speed tier, not guarantee it, put in data caps, and charge CDN. No wonder they pay so much in lobbying!

Actually the folks who build first Kazaa (file sharing) then Skype (VOIP) and now runs Rdio (music) build heavily on P2P. And in-between Skype and Rdio they had a video service much like Netflix called Joost which was build on the same P2P technology that’s behind their other projects: More about Joost here: http://en.wikipedia.org/wiki/Joost

Joost was a massive failure and a great example of why VC’s won’t touch P2P delivery. Sequoia alone lost $45M. Friis and ZennstrÃ¶m blew another $15M from when they received part of a $2.6 billion cash payment from eBay buying Skype.

Why can’t Netflix give us an option to cache content that we have in our streaming queue? This would allow it to buffer and give us the top quality available, which would really be great for 4K also. I am increasingly annoyed that my Netflix quality is so poor, however, that won’t change for me w/ peering because I am on a Rural “your lucky to have anything at all” connection… Most devices like Roku already have a USB port for large flash drive or even HDD.

The problem with P2P is asymmetrical connections,American ISP’s are already doing it to cripple P2P and if Netlix goes P2P it would get much worse. Regulators don’t seem to care about upload speeds at all so good luck with that.